Fiduciary rule enactment could bring adviser consolidation

Register now

The fiduciary rule’s June 9 enactment could trigger a flurry of merger and acquisitions among retirement benefit adviser/broker firms, industry observers say.

Several firms that study consolidation in the financial-services sector, including OPTIS Partners, note the difficulty of directly tying this trend in the employer market to any of their research. However, they point to several driving factors.

Indeed, many independent agencies or brokerages “will be more apt to consolidate with larger businesses that can absorb the compliance [costs] through volume,” says Phil Trem, SVP at Marsh, Berry & Co., a leading M&A advisory firm. The company provides consulting services in the financial services industry to independent insurance agents and brokers, including those with an expertise in retirement planning.

In addition, many retirement plan advisers who aren’t registered investment advisors may look to merge with an RIA firm that knows how to grow a business adhering to fiduciary guidelines. And RIAs may be looking for partners. More than three quarters of 234 independent RIAs surveyed by FA Insight, TD Ameritrade’s research arm, indicated their growth plans include a merger or acquisition over the next five years. It’s not known whether the respondents service retirement plans.

Any new pairings involving retirement benefit advisers will depend on the type of client that the RIA targets and service suite or lines of expertise offered, as well as the strategic preferences of the selling and acquiring parties, according to Dan Inveen, a consultant with TD Ameritrade. He says this scenario pertains to either an RIA or retirement plan adviser.

Also see:Win the battle, lose the war? The fiduciary rule moves forward.”

“Certainly, greater regulatory scrutiny is one impetus for a merger and acquisition in general, particularly smaller firms that just don’t have the scale of resources to hire full-time, dedicated compliance people,” he adds.

Another factor that may trim the rolls of advisory firms is the fact that some older practitioners may determine they don’t want to spend the time and money needed to meet the new regulations and decide to sell their businesses. And those firms might be attractive to growth-minded owners in search of “scale on a pace that they cannot do organically,” Inveen says.

Differentiated practices
Barbara Delaney, a principal with StoneStreet Advisor Group, LLC, sees opportunities for expanding plan-sponsor advisers to acquire the retirement plan business of registered reps of a broker-dealer that doesn’t switch to this model. “If you are collecting commissions on a registered rep plan and it’s not a levelized commission structure, you’ve got to really work quickly to get this done,” says Delaney, EBA’s Retirement Adviser of the Year in 2014. Her firm helps plan sponsors manage their fiduciary obligations and participants plan for retirement.

Whatever happens, it’s clear that there will be a need for advisers to differentiate their practices in terms of both employer and participant services, according to Rob Massa, director of retirement at Ascende, a division of EPIC. That could include anything from understanding how retirement plans work in M&As to explaining to participants how their plan fits into their larger benefit program

“We’re all going to look alike if we don’t add the right value,” adds Massa, EBA’s 2016 Retirement Adviser of the Year, noting how the topic surfaced at a meeting earlier last month of the Retirement Advisor Council. “Competition is going to get fierce. Everyone thinks that this is going to be some free-for-all for the adviser community.”


For reprint and licensing requests for this article, click here.